Tuesday, October 21, 2014

Why, indeed?

Why should policymakers care about economic inequality?

In an early survey of the literature, economist Roland Benabou at Princeton University in 1996 found that the vast majority of studies said high and rising inequality
harmed economic growth.

Then, some thought a second time;

In response to this early literature, various economists explored the
nuances of this relationship. University of Melbourne economist Sarah
Voitchovsky summarizes
much of this middle literature in a 2009 review, finding that there was
substantial disagreement about the relationship between inequality and
growth. Some studies showing that inequality may improve growth under
certain circumstances.

On the third hand;

The muddle of this middle period in this economic
literature has given rise to a newer narrative. Methodological
differences appear to have driven the differences in the results, with
later analysis finding that higher inequality can be associated with
faster economic growth in the short term, but over time higher
inequality is related to lower growth.

Finally;

Recent work by International Monetary Fund economists Andrew Berg,
Jonathan Ostry, and Charalombos Tsangaridis as well as by Roy van der
Weide of the World Bank and Branko Milanovic of the City University of
New York have robustly found a negative relationship between economic
inequality for developed countries and within the United States,
respectively.

Or not;

This most recent wave of studies will likely not be the
final word on the relationship between economic inequality and growth.
Furthermore, there issubstantial work needed to understand how
inequality affects growth.

But that won't stop the inequalityphobes from doing something...anything...to end this...something.